Data Show State Slump Worsening Before Terror Acts

California’s economic slump was deepening even before the Sept. 11 terrorist attacks prompted thousands of fresh layoffs, according to employment data released Friday.

State officials reported that California’s unemployment rate reached 5.4% in September, up from a revised 5.3% in August and the highest level in nearly 2 1/2 years. The latest figures, which focus almost exclusively on conditions before Sept. 11, also indicate that the state lost 17,400 jobs last month.

The employment reports, together with a recent surge in claims for unemployment insurance and daily announcements of job cutbacks, provide fresh evidence that the state has entered a recession or near-recession.

“California, like the rest of the country, probably is in a recession at this point. The questions from here on are how long and how deep,” said Brad Williams, economist for the California legislative analyst’s office.

The unemployment rate for Los Angeles County bucked the general state trend, falling to 5.6% in September. That was down from a revised 5.8% in August but up from 5.3% a year ago. Analysts speculated, however, that the improvement was largely a statistical fluke.

Orange County’s jobless rate held steady at 3.2% for a second month but is up from 2.6% in September 2000.

State officials and economists said the unemployment rates for Southern California and the state are almost certain to be worse next month as job losses from the crisis-plagued travel and tourism industries are tallied.

The California Employment Development Department has begun hiring 270 more staffers in its field offices to handle a flood of unemployment insurance cases involving recently fired workers. EDD Director Michael S. Bernick noted that in the three weeks after Sept. 11, initial claims for unemployment insurance were nearly 30% higher than in the same period last year.

The biggest share of the recent layoffs, Bernick said, appears to be in the travel industry. Most of the affected workers, Bernick added, are in the San Francisco, Los Angeles and San Diego areas.

Those being laid off include low-wage workers such as Maria Santana, who lost her $9.87-an-hour job as a housekeeper at Beverly Hilton Hotel shortly after the terrorist attacks.

Santana, a single mother, said she spent most of the last few weeks looking for another hotel or restaurant job but hasn’t received a nibble.

“They all say the same thing,” she said while collecting a bag of groceries at a union-run relief center this week. “It’s slow; they’re cutting people.”

Even without up-to-date figures on the extent of layoffs since the terrorist attacks, the state has ample evidence that the economy has slowed sharply since last year. This year, California has averaged job gains of only 3,600 a month. During the same period in 2000, the average monthly increase was 48,800.

What’s more, the figures for the last three months show California has lost 29,200 jobs. If that trend continues for another quarter, it would confirm for most economists that the state is in a recession.

Although there is no formal definition of a state recession, most economists consider it a period of half a year or more with shrinking employment and economic output.

For much of this year, California had dodged job losses equivalent to those suffered by the rest of the nation, but lately it has mirrored the U.S. pattern.

As reported a week ago, the U.S. jobless rate held steady at 4.9% in September, but the nation lost 199,000 jobs, the worst one-month setback in more than a decade. The U.S. jobless rate in September 2000 was 3.9%, tied for the best monthly rate since the Vietnam War era.

Many analysts remain optimistic that the state’s downturn--attributed mainly to a sharp drop in business spending on technology, along with a global economic slowdown--will be comparatively mild and short. They are counting on interest rate cuts and government spending to help foster a rebound.

For now, though, unemployment statewide is at its highest level since April 1999, when the jobless rate also was 5.4%. California’s unemployment rate has climbed since February, when it stood at a 32-year low of 4.5%. During the state’s deep recession of the early 1990s, unemployment peaked at 9.7%.

Black workers have been particularly hard hit. The jobless rate among blacks climbed to 8% in September, up from 7.7% in August and the highest mark since August 2000, when the rate was 8.2%.

Among Latinos, the jobless rate edged down to 6.7% last month from 6.8% in August and back to the level where it stood in June and July.

The deterioration in California’s job market, along with overall economic slowdown, has begun to strain the state’s budget.

The California Department of Finance reported Friday that revenue from the state’s three main tax categories--personal income, sales and banks and corporations--amounted to $6.3 billion last month, down 13.7% from September 2000. Already, Gov. Gray Davis has instructed state agencies to prepare plans for possible spending cuts of 15% in the 2002-03 fiscal year.

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Times staff writers Nancy Cleeland in Los Angeles and Julie Tamaki in Sacramento contributed to this report.

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